July 31, 2024
Rembolt Ludtke Employment & Labor Practice Group
In yet another sweeping employment and labor development this year, the U.S. Supreme Court issued a decision on June 28, 2024, abolishing a long-standing principle of administrative law. In Loper Bright Enterprises v. Raimondo,, the Supreme Court overturned Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. Chevron is a 1984 case which embraced a principle that required courts to defer to an agency's interpretation of a law it administers (known in the legal world as “Chevron deference”). In a 6-3 decision, the Court in Loper concluded that Chevron deference violates the federal Administrative Procedure Act (APA), which instructs that a court, not an agency, must independently decide all relevant questions of law without deferring to the agency’s interpretation.
Background
Most of us remember learning about the balance of powers in federal government at some point during our middle school years. Whether through Schoolhouse Rock! or otherwise, most recall that the legislative branch is tasked with creating the laws, the executive branch is tasked with administering the laws, and the judicial branch is tasked with interpreting the laws when disputes arise. In practice, these powers overlap when laws are open to various interpretations.
In Chevron the Supreme Court created a two-part test to determine when a court should defer to an agency's interpretation of the law it administers. Pursuant to this test, a court was required to defer to an agency's interpretation of the law if (1) the law was ambiguous, and (2) the agency's interpretation was reasonable.
At issue in Chevron was the Environmental Protection Agency’s (“EPA”) interpretation of the Clean Air Act. Here, the National Resources Defense Council was attempting to require the EPA to enforce pollution controls at industrial facilities such as those operated by Chevron. The EPA at this time was under President Ronald Reagan and its interpretation of the Clean Air Act was more favorable to industrial facility owners than conservationists. The Court ruled in favor of the agency which began the 40-year era of agency deference.
In the wake of Chevron, agencies enjoyed a diminished burden to demonstrate that their interpretations were valid and reasonable and should be upheld. Consequently, agencies relied on Chevron deference when interpreting and enforcing employment and labor laws without significant judicial oversight.
Proponents of Chevron argued that deference to agency interpretations was appropriate, as agencies were in a better position to determine the meaning of the laws the agency administers than the judiciary. Critics of Chevron argued that agency interpretations are never neutral and generally operate to expand the agency’s power. This, critics argued, upset the balance of powers by stripping courts of their duty to interpret ambiguous laws.
What Employers Need to Know
We anticipate the Loper decision will impact the role of federal agencies in implementing and enforcing labor and employment laws across the U.S. Over the past few years, agencies have taken increasingly extensive actions, which may diminish in the aftermath of Loper. Even if agencies continue to take extensive enforcement actions, such actions may face additional legal challenges that have a greater chance of success.
We anticipate this shift may implicate rules and regulations affecting employers, including many consequential rules and regulations implemented this year. These include, but are not limited to, the Federal Trade Commission's Rule banning non-competition agreements; the National Labor Relation Board's new joint employer rule; rules issued by the Department of Labor increasing the minimum salary threshold for employees to qualify as exemption under the FLSA, and relating to independent contractor classification; a "walkaround" rule issued by the Occupational Safety and Health Administration permitting union representatives to accompany inspectors during inspections; and, the Equal Employment Opportunity Commission's regulations implementing the Pregnant Workers Fairness Act.
Importantly, while the Loper decision eliminated the deference previously granted to agencies under Chevron, courts may still use an agency's interpretation of applicable law as guidance. The Loper decision stated that an agency's interpretation may be informative to the extent that it relies on factual premises within the agency's expertise or was issued roughly contemporaneously with the statute and has remained consistent over time. Further, the Supreme Court made clear that Loper does not overturn prior decisions relying on Chevron. Consequently, agency regulations upheld pursuant to Chevron remain valid, and employers should continue to follow existing regulations and guidance.
Next steps
With the numerous employment and labor developments we have seen in 2024, employers should continue to stay informed on this evolving area of law. The Rembolt Ludtke Employment & Labor Law Practice Group is available to assist employers with questions regarding the matters addressed by this article, as well as other employment and labor matters that arise in the workplace.
This article is provided for general information purposes only and should not be construed as legal advice. Those requiring legal advice are encouraged to consult with their attorney.
